How the High Price of Gold Affects Gold Coins of Numismatic Value
While the demand from consumers to buy gold bullion coins remains strong, long-time gold coin collectors are waiting this one out if they can.
There is no time more tempting to sell off gold coins than during a surge in the spot price of gold, but anyone looking to sell or buy gold bullion coins might want to consider waiting out some of the turmoil before making a decision on their gold coin investments. This is especially true in the case of very rare gold coins or those that collectors tend to hold on to for a very long time as part of a larger type or mint collection.
That is not to say that the price of gold, rising as precipitously as it has since November of 2008, doesn't affect movement in the price for those who buy gold coins for their numismatic or historical value. Prices of gold coins that have been impacted by “melt events” can rise appreciably over the course of just a single month, especially in the case of already very rare mintages.
Those familiar with gold coin investing for the collector's market are well aware that melting is not the only way that rare coins become “unavailable.” In fact, the most common way for coins to go out of the market is for them to simply be horded. That is, of course, exactly what many people do when gold goes up as a result of economic instability. As certified gold coins become more scarce on the numismatic market, their price goes up. There is a correlation, but it's not direct.
For many who already have a history with purchasing pure bullion gold coins, the amount of gold that has been purchased when they do go in also increases in such times. In fact, some dealers have noticed that their sales per investor in 2009 has actually gone up several times over. Many say they've not seen per purchase spending on gold this high since the recession of the early 1980s. The same trend has also been observed by those who sell numismatic gold coin investments, though not to the same degree.
It would seem that the market for collectible gold coins is not directly related to the spot price of gold except when the crisis does become so great that the melting pot provides a better price. There is no model for how collectible coins fared during the Great Depression of the 1930s because so many coins were melted down at that time due to the Presidential Act that confiscated all privately held gold other than dental, jewelery and other decorative or industrial uses.
Indeed, much of the great value in gold coins issued by the US Mint between 1795 and 1933 that is enjoyed by collectible coin sellers today is as a result of this policy that saw over 500 tonnes of privately-held gold melted down and revalued. Millions of coins of all types were lost forever in that event, causing some coins to be rare as to fetch prices in the millions, themselves.
So, as to whether or not there will be a market for consumers to buy gold bullion coins of numismatic value, the answer would seem to be that it's not a problem, provided things don't get much, much worse.
Stewart Lawson
March 19, 2009
